Augean stables getting cleaned? What a stink...

Looks like this is the come-to-Jesus moment for Indian politicians.

The Supreme Court of India has rightly asked why the supposedly clean Prime Minister was dawdling when A Raja was brazenly stealing the country's wealth in broad daylight. The government is in a bind, the Maharashtra CM is gone over stealing war widows homes, and the CWG culprit also is out of the Congress party's charmed circles. In Karnataka, the BJP CM is trying to brazen out the fact that 4 of his relatives were alloted plots in prime areas for a song. This is par for the course, and the fellow has to explain himself NOT because he should be flogged and jailed for corruption, but because this has come to light at a time when the BJP wants to embarrass the government on corruption charges. Meanwhile, an independent think-tank says that fully 50% of India's GDP is made up of black money, which pays no taxes and is illegal!

All this action is great for our polity. However, it is by no means enough. It all started gaining momentum because Sonia Gandhi got moving on the Adarsh society scam. (Aside: Much as I am against dynastic politics, I believe that Rahul Gandhi and his mom are India's best bets for probity in public life at this point in time). This is great, but we need to institutionalize comeuppance in our system. A corrupt person should be caught by a truly independent investigative agency, something like the Central Election Commission (the CBI? Ha Ha Ha - this is probably the most docile and conveniently blind of lapdogs in the world), be tried by courts which do not take 20 years to deliver their judgements, and be meted out swift punishment.

All this can be done, though it is by no means simple to do. But then, greatness for a country does not come on a platter - it has to be won through hard work and bloody-mindedness.

There's something about them...

Watching Michelle Obama dance very gracefully to a Koli song along with tiny schoolchildren while Barack nodded enthusiastically in tune with the music, the wife made an astute remark. There is something about both of them! An elusive something that captures dignity, grace and honesty.

I agree totally! The couple go on eco-friendly holidays, are fit and athletic, undeniably intelligent, super powerful, and yet seem down to earth and likable (sic: of course I have never met them myself so can only rely on portrayals in the mass media).

More power to the Obamas! I hope the dude overcomes his mid term electoral drubbing and wins a second term for himself. He, and his wife are shining role models in an increasingly cynical and bleak world.

Goa!

The wife, kid and I spent a few indolent days in Goa recently. We stayed very close to the Cansaulim beach, and I for one was quite impressed. Nice, spotlessly clean beach, no crowds, clean water and white sands!

Add pina colada (nice), Corona beer (nicer) and Margaritas (nicest) to the mix, and we are talking serious hedonism! However, the most fun was had by the daughter - she made sure that her dad got a lot of exercise to wear off the alcohol (carrying her about) and that her mom did not suffer from too much of sleep (feeding her on demand). She had a blast in the pool, and made zillions of friends, on the airplane, in restaurants or where we stayed.

We did not venture out much (in fact, not at all) but did enjoy some good Goan cuisine. Alas, crabs were out (sigh!). However, we did get compensation in the form of a rainbow!

New York, New York

First, a confession - I am a confirmed Indophile. Despite having had many opportunities to work and live abroad in the short span that has been my working life, I always chose to stay back in India. And insularity had nothing to do with it - I have travelled quite a bit - all over Europe, South East Asia, Australia and Africa.

Now that that is out of the way, I come to the main point - I think New York is truly the greatest city in the world. Apart from day trips once or twice each year, I have experienced NY for exactly a week. And what a week! The wife and I lived in style at the Ritz, practically overlooking Ms. Liberty and in shouting distance from the Bull of Wall Street. We had many drink-sozzled nights with our IIM buddies in the Village(?? - I was too drunk to be geographically astute) and we partook of some wholesome junk at various restaurants across the city. The sheer infectiousness, the rhythm, the joie-de-vivre of the city totally took us in.

I think the eureka moment came when we were on our way back to our hotel, and the taxi driver started speaking in Pakistani urdu on his cell-phone, describing some nocturnal activities that he had been upto / would like to be upto (a conversation which would have made my ears turn red, had they not been already numb with generous helpings of alcohol) to his buddy, and the wife and I exchanged suppressed giggles, that I got it. New York is a melting pot, a city that gives you the freedom of anonymity in exchange for your enriching its already super-rich cultural milieu. When someone attacks New York, they attack all the nations of the world. They attack humanity.

New York rocks!

Weird rules spoil the game

More often than not, we as a country prefer to have a plethora of rules. Exemptions, special situations and sub clauses are the norm. We truly have spaghetti - like laws (and I don't mean that they are yummy!), income tax rules, excise duties and what not.

A prime example of this is the Coal India IPO. If one had applied for shares worth Rs 100,000 (the maximum amount under the 'Retail' category), one would have got shares worth approximately Rs 46,000. However, if one had applied for shares worth Rs 100,001, one would have got shares worth Rs. 5,000! Rules such as this, while meant to protect the elusive 'small investor' just make it mandatory for people to game the system and apply all sorts of means (like applying as a retail guy even though I'm actually a HNI through other peoples' names or 'renting' demat accounts for hot IPOs) to maximize economic benefits. Rupenben Panchal and her ilk proliferate in such a system. Such systems are always regressive, and it is high time we realized that we are all homo-economicus i.e. we respond to incentives.

We need to make rules simple and easy to understand. No one should be able to say - I need to pay mega$$$ tax since I made mega $$$ profits. However, applying sub-clause xii-b under section VII part ix of 1960 Companies Law as applicable in 21c Excise and Exports Amendment 1984, I can declare myself insolvent. Hence no tax.

HOMP

The wife and I have a new addiction, if one could call it that. Every night, at 10:30 pm, after putting the little one to sleep, we sit down in front of the idiot box and catch Highway on My Plate on NDTV Imagine.

Rocky and Mayur, the co-hosts of the show, are delightfully quirky and keep cracking one liners and pulling each others' legs. (e.g. of a typical throwaway line: If God did not want us to eat animals, he would not have made them of meat!) The food on display invariably looks yummy, and typically is described very alluringly, and the wife and I have a tough time trying to control our hunger pangs. The icing on the cake is that the dudes travel to exotic places which more often than not, are very scenic. For example, the last 3 shows that we have seen have been set in a remote tea stall in Leh while a blizzard rages outside, Kumarakom, with delightful views of Lake Vembanad from atop a ferry, and breakfast of toast and kahwa overlooking snow clad peaks near Srinagar.

After watching today's episode describing chettinad crabs, I'm salivating and waiting to dig into some crab next week in Goa!!

The court should ask Manmohan Singh this question...

From a news article (emphasis mine) - good questions all. The real question however is - why did the PMO allow this to happen? And why are they not doing anything about it till date? I'm confident the CBI probe will not yield anything till at least 2014, when it will be time for a new election.

The Supreme Court on Friday slammed CBI for its "slipshod" investigations into the 2G spectrum allocation scam, in which the alleged role of Telecom Minister A Raja has come under the scanner, saying "the same minister is still continuing today".

"You (CBI) have not done anything. The matter is serious. The same minister is still continuing today. Is that the way the government functions?

Do you follow the same standards in respect of everyone? One year has (already) gone by," a bench comprising Justices G S Singhvi and A K Ganguly said. The remarks of the bench came as soon as Additional Solicitor General (ASG) Haren Raval began responding to the submissions made by the counsel for an NGO which has brought the issue before the apex court.

The ASG said the enormity, complexity and volume of the documents involved in the issue required some more time to complete the investigation. "We have so many phone calls to examine," Raval said.

However, his submission was cut short by the Bench which said "it's only slipshod. You are dragging your feet". Raval then resumed his submission and said the complex nature of the issue was the reason the investigations into the scam has taken some time. He said that to maintain continuity, the investigation is being carried out in right earnest and senior officials of competence are conducting the investigations into all aspects of the matter.

At this point, the bench shot back "will it take another 10 years?"

A Case of Exploding Mangoes

After quite a while, I read a book which made me stay up late in order to finish it. It had been lying around the house for quite some time, bought by the wife who never got around to reading it (and perhaps for good reason too! - but more on this later)

The novel tells the (probably fictionalised - but you never know!) and utterly gripping account of the tales surrounding the death of General Zia ul Haq, Pakistan's military dictator of the 70s. Full of black humour, the writing is very terse and takes time to build up tempo and atmosphere, culminating in a page-turner of a climax. It is a very male oriented story with bald recitals of great brutality and oppression, which makes me think the wife would not have liked it a bit. However the treatment is not unlike Catch 22 or some of the other great books. Definitely an author I would want to read again.

General Zia comes across as a bit of a buffoon, which all dictators probably are, and the ISI comes across as a loose weapon, which again is probably true. The Americans come across as double faced snitches, which they definitely are. There is a hilarious (and disturbing) chapter in the book about a certain bearded gentleman named OBL 'of Bin Laden Constructions' trying to hobnob socially with the CIA and Afghan mujahideen.

So finally, who killed General Zia? Was it a krait's poison? A son's revenge? His own colleagues from the army? Poison gas? Or a crow? Or all of them?

They don't make 'em like the old times anymore

On a super short and totally unnecessary trip to the US, which involved a total of 32 hours of flying time (and 10 hours of transit time) in a total period of 94 hours, I have seen 7 movies so far. I’m typing this on the aircraft, trying to relieve my mental inertia, and I have 5 more hours of flying time to go. I may watch some more. The list so far includes Iron Man 2, Shrek Forever After, Wall Street (the old one), Robin Hood (the new one), Badmash Company, The Untouchables and Clash of the Titans.

Most of these movies are just a pile of junk. Iron Man 2 is so juvenile that its funny. Robin Hood (and I had great expectations from Russel Crowe) is no Gladiator – it is just dull and dreary. Irony - the merry men are somber and depressed. Badmash Company is puerile and Shrek is just repetitive and boring. The less said about Clash of the Titans the better – it is a shoddy attempt to make a Lord of the Rings type movie – it just falls flat. The only two worthwhile movies are the golden oldies. Wall Street, which I’ve seen umpteen times but which still captivates with its voyeuristic glimpses into the world of glamour and serious money, though the events in the movie seem quaint now in this age of derivatives and algorithmic trading. The pick of the lot is certainly Brian De Palma’s The Untouchables. It tells the story of the capture of Al Capone. It also tells me why America is a great nation, and will remain the foremost nation in our generation, never mind recessions, double-dips or Sarah Palin. Power packed with Kevin Costner, Sean Connery, Robert De Niro and Andy Garcia (the pick of the lot, I thought), it depicts the power of the individual over the system. I cannot see such a thing happening in India (nor any other country).

I wonder why new movies are just not in the same league as the old classics. Is it because we have moved away from the dramatic core, powerful scripts and simple ideas into animated wizardry? The top grosser of all time – Avatar – was so bereft of any emotional core that I was left wondering if I really saw the original. Give me Casablanca any day!

Now for number eight – perhaps Juno for the 2^nd time? Or Rocket Singh?

An eventful week

Last Monday, just before heading out to another week of work, I had remarked to my wife that this would be a killer week, and that if I came out smiling at the end of it, I would be surprised. This proved to be quite prophetic. But not quite in ways that I could have foreseen.

On Wednesday, I was supposed to fly down to Bangalore for a day. It so happened that I felt a bit (make that quite!) unwell on Tuesday, and following excellent advice from the better half, did the uncharacteristic - I went to the doctor. Once there, the fun and games began - turned out that I had acute febrile fever of north of 103F. I was immediately put on some kind of drip, packed up with medicines, and asked to get all kinds of blood tests done. Done and dusted, I had dengue fever!

The next 8 days were extremely painful, with fever yo-yoing between 100F and 103F, general weakness and an inability to do anything. The worst thing was that I had a very bitter taste on my tongue, and eating was a big pain. Not to mention the liters of blood that I had to get pricked out of me for the very frequent platelet and other tests. Even currently, I'm not recovered fully. I do not have any visibility on how and when I'm going to get better, and I'm sick to the gills with the illness.

So the week was quite bad. I've probably blown away any chances of a decent bonus this year end, have been snapping needlessly at my immensely patient and loving parents and wife, and been a general good-for-nothing.

The only silver lining from this entire bad affair has been a refocusing of priority into what is truly important and what is all chaff. I have realized that there are many things wrong with me mentally, and that I need to lighten up and loosen out a bit. Fundamental life changes are coming around!!

Bravo!

I posted a rant on the highly corrupt telecom minister of India a while ago. Feels good to hear that while I only ranted, someone else has gone ahead and done something about it!

A couple of organizations and a senior journalist have filed a public interest litigation in the Supreme Court, and the Court has sent notices to A. Raja, the Department of Telecom and a lot of affiliated parties. Kudos to these gentlemen.

The CBI has been 'investigating' this case for the last few million years, and I am sure they will keep 'investigating' it further till the culprit dies of very old age, or the Govt. is voted out of power or till the DMK and the Congress fall out. Long live the judiciary!

Rich (and nasty)?

There is something surprising about a private banker warning his colleagues about the rich. It would be like a director ofVolkswagen AG casting doubt on motorists, or the boss ofMcDonald’s Corp. distancing himself from people who eat fast food. Rather like valets, the main aim of the private banker is to court the wealthy.

At a conference in Zurich last week, the head of Barclays Wealth Management’s private-banking unit, Gerard Aquilina, appeared to issue a red alert about the richest of clients.

“Beware of the complexities of dealing with ultra high net worths,” Aquilina told his audience. “Demanding and often unreasonable” requests from them may create “impossible demands on the organization.”

Such as? Help with getting children into the right school, securing credit to buy property, or obtaining last-minute concert tickets, for example. Even worse, the richest of the rich turn out to be pretty stingy as well. They don’t even want to pay the full fee for all the services they demand.

It was strong stuff. But it was also an insight into the way the rich have changed over the past decade. They are, it turns out, a nasty bunch of people who are only getting nastier. And the banking industry only has itself to blame.

Customer Demands

To some degree, Aquilina’s warning can be seen as the kind of observation you find in every industry. Executives in any business tend to feel the real trouble always comes from the customer, who is often stupid, unreasonable and annoying, and sometimes all of the above.

No doubt, the software engineers at Microsoft Corp. fume about all those blockheads who don’t know how to partition their hard drive, or re-configure the registry file. There must be countless airline executives who occasionally dream about how smoothly their planes would circle the globe if only they didn’t have to fill them up with stupid tourists, their snotty children, and their overstuffed bags.

It’s always the case that people are going to be irritated by those they have to serve. There’s no reason that even super- smooth private bankers should be exempt from that. But Aquilina makes an interesting point.

There is an increasing amount of evidence that the rich are a vicious tribe of people. One study last year from the University of California, Berkeley, found that the rich are ruder than others. Another piece of research, conducted at the same institution, concluded they were less likely togive to charity than poorer people were. A third study, carried out at the Humboldt University in Berlin, concluded they were “nastier,” in the sense of being keener to punish others.

Top of Tree

Nothing is shocking about that. You don’t get to be rich without being difficult and demanding. You need some sharp elbows to get to the top of the tree, and there is no point in being squeamish about treading on a few toes along the way. And the rich have a lot more to protect than other people: They have to be fierce to hang on to all that wealth.

They have probably been vicious ever since one caveman used a bigger club to take control of the grandest cave on the hill.

In the past, most fortunes were built in association with ordinary people. Factory owners were aware of the shop-floor workers on whom their wealth depended, and that shaped the view of themselves. Carmaker Henry Ford doubled his workers’ average pay to $5 a day in 1913 and shortened their working hours. The Cadbury family of chocolate makers in the U.K. built a small town for many of the company’s workers in Bournville, near Birmingham, in the 19th century. That made them more human.

The growth of the financial-services industry and the bonus culture has changed that. The investment bankers and hedge-fund managers who make up most of the new rich elite don’t have much contact with ordinary people. They assume their wealth is entirely the result of their own brilliance. And they cut themselves off from normal life.

It is an industry that mints billionaires and also breeds arrogance, selfishness and snobbishness.

Aquilina has put a spotlight on an industry that only has itself to blame. Maybe that’s why he’s warning others.

(Matthew Lynn is a Bloomberg News columnist and the author of “Bust,” a forthcoming book on the Greek debt crisis. The opinions expressed are his own.)

Is this guy for real?

Apropos the earlier post, here is an interesting statistic I picked up today. While I do think the guy is making wildly exaggerated statements to get some headlines, I do think the guy has a point (which is why trade #1 in the earlier post).

Judge for yourself!

Oil Should Be Around $10 a Barrel: Analyst

CNBC

On Monday August 30, 2010, 12:57 pm EDT

The price of a barrel of oil would be closer to $10 if the commodity wasn't traded as an investment instrument, given the record-high levels of U.S. oil inventories, Peter Beutel, president of Cameron Hanover, told CNBC Monday.

"I honestly think that if there were no investors using oil as an asset that the price of oil right now would be $10 or $15 or $18, but it wouldn't be anywhere near where it is," Beutel said.

"We have so much oil right now, more than we've had in 27 years. Why is it 27 years? Because that's how far our records go back. It's probably the most in 50 or 100 years," he added.

Part of the reason the price of oil is currently above $74 (BIS: US@CL.1) a barrel is because of a belief in the economic recovery, Beutel said.

Comments by Federal Reserve Chairman Ben Bernanke over the weekend gave the commodity a boost as he signalled a willingness to support the fragile economic recovery with additional policy measures.

From a historical perspective, Beutel pointed out that the current level of inventories is even higher than when the price of oil was below $20 a barrel.

"We've got 50 million barrels of crude more than we had two years ago. We have 176 million of distillate," Beutel said. "When I started in the business back in 1980 we used to think to ourselves: "Gee, we would love it if we had 140 million barrels of distillates to start the winter."

Not all market watchers agree that the price of oil should or will go lower. Jonathan Barratt, managing director at Commodity Broking Services, told CNBC that he thinks oil will rise to between $82 and $85 a barrel.

Investment thoughts

Whiling away time late Friday night, thinking of what trades to put on in the market next. A few thoughts (disclaimer: these are just ideas, and I may change my opinion on them anytime!!)

1. Oil marketing companies - in the next 1 week, all the 3 oil marketing companies (IOC, HPCL, BPCL) will pay out 2-3.3% of their current market value as dividends. This will be tax free in the hands of the shareholder. If one has spare money lying around in the bank, one can earn the equivalent of interest for the whole year in 1 week. And the best part is that it is going to be tax free! Of course the stock price will get adjusted downwards for the payout, but here the bet is on a continuing weak global economy and consequent weak oil prices. If crude oil prices remain below $73 per barrel, I think the oil marketing companies will rise in value at least 5-10% from here. It is a big IF, but I am comfortable with the risk / reward here.
2. Tata Motors - sales of the Jaguar and Land Rover are picking up. The domestic business is going great guns - commercial vehicles are on a roll, the Nano is ramping up volumes, and demand for the Indica / Indigo are robust. If Jaguar and Land Rover sales sustain at the current trajectory, it will a) magnify earnings per share because of the highly leveraged capital structure of the company b) allow quick de-levering (high leverage has been a major overhang on the stock) and c) lead to a re-rating in the p/e or ev / ebitda multiples. The multiplicative effect of these 3 drivers could lead to $$$ returns! The rewards should more than compensate for the risk of downside.
3. Tata Steel - a sentimental favourite for me. Currently trading at lower than 5 year average valuations due to fears about Corus performance. The brain likes it because a) the India operations are superb (lowest cost producer in the world), b) most of Corus' losses stemmed from the fixed costs at a particular plant, which has since been shuttered and put on the block and c) the Tata group have managed to turn around all of their global acquisitions - Tetley a decade ago to Jaguar Land Rover a couple of years ago. The heart likes it for reasons unknown! Overall risk / reward seems quite favourable.
4. Sell or short Suzlon. Loads of debt (approx 10x EBITDA), negative EBITDA (high fixed costs), no new orders internationally in the last 3-4 quarters and general poor perception of quality (broken blades being a big issue with its windmills). The company does not have enough cash to even service its debt, let alone pay the principal back. As of now, seems like a candidate for bankruptcy. Again, I dislike this stock sentimentally for reasons unknown.
5. Reliance Industries - because this is the big daddy of Indian stocks and has underperformed the Index by 30% this year. This cannot continue - either RIL should rise or the Nifty must fall. Long RIL - Short Nifty is one trade that suggests itself

Other ideas welcome!

Pyaar ke side effects

This post is actually about shaadi ke side effects - one very strange effect in particular. I had heard about this phenomenon, but seeing it in action is very mystifying!

The longer you are married, the more you become like your spouse. A slow and gradual process, no doubt, but utterly unhalting. Before our marriage, the wife loved milk, I did not. I loved watching movies, she did not. I was a late sleeper and late riser, she was the opposite. I liked eating out, she was a home-made healthy food freak. She was a big yoga fan, I was not. I had 10-12 cups of tea a day, she was a 2-cups-a-day girl. I was the more foolhardy risk taker while she was the quicker tempered one.

And now, I am a milk maniac, she has a lot of tea, I wake up at 6:30am without an alarm, while she sleeps for a bit longer, I have become a yoga fan, the last movie I saw was 7-8 months ago, I prefer the plain and simple ghar ka khana; she is a successful entrepreneur while I hold on to a steady job. She has become patient and I fly into rages more often. We have even begun to have similar choices on colors, cars, homes, books, people and music!! This was unthinkable as recently as a couple of years ago. Its almost as if we are converging into the same person!

Fascinating development!

Anagram

Heard this one recently -

Suresh Kalmadi: Sir U Made Lakhs

Disillusioned

Yesterday, as I spent more than an hour in my car navigating the many traffic jams that had proliferated in the rain, I saw a disquieting event. At a jammed-for-miles traffic intersection, there suddenly appeared a cavalcade of old Ambassadors with flashing red and blue lights, which then proceeded to take the wrong side of the road, speeding away to their destinations. Traffic from the other side was disrupted, the people who had been waiting in line for more than 20 minutes kept sitting there in their vehicles like idiots, and the policemen manning the intersection did nothing except wave the cavalcade forward.

This led me fuming - why is it that my time is always considered less precious than some likely corrupt, illiterate, venal, small time thug? Why are rules only for me, and not for this same person? I remember an ad on radio during election time talking about the "garibon ka massiah" Kanwar Singh Tanwar, the BSP candidate from South Delhi. This very same thug's son recently crushed 2 people to death in his speeding BMW, which he was driving in an inebriated state.

The thought led to many other (I had lots of time to kill in the jam), and I realized that everywhere, in every sphere, the Indian state has failed. I look at the Commonwealth Games fiasco, and feel ashamed. I look at the big dug-up holes that pass for in-process-of-beautification roads in Connaught Place, and dont know how to explain it to myself. The latest on these holes is that the contractors have given up on getting them repaired in time, so they will be filled back with mud, and 'beautified' AFTER the Games are over. Meanwhile, Kalmadi and his ilk line up their pockets with Rs 11,000 crores, delivering leaking stadia, substandard roads, and shoddy pavements. The RWA in my colony spends its precious time getting petitions for cutting trees so that they can create yet another cemented parking lot for their third cars. Meanwhile, every rain, the lane outside gets flooded and breeds slush and dengue carrying mosquitoes.

The Indian state is failing. No - this is beyond the state. Indian society is failing. There is little I can do about it. I am not sure if the reason is poor governance and systems or Indians themselves. The 'real' India of the villages still believes in male chauvanism, caste based 'khap' panchayats, feudalism and illiteracy. The 'elite' Indians living in cities like Delhi are rapists, totally selfish, corrupt, narrow minded and a threat to social living.

I can ignore all this and keep going through my daily grind (as I have been for ages). I do not know what else I can do?

Did you know?

Doing some research on media in India, I came across this gem...

The longest movie in the world according to Guinness World Records is The Cure for Insomnia, directed by John Henry Timmis IV. Released in 1987, the running time is 5220 minutes (87 hours) and has no plot. Instead, it consists of poet L. D. Groban reciting his 4,080-page poem “A Cure for Insomnia” over the course of three and a half days. The movie is inter-spliced with clips from porno and heavy metal music videos.

Weird!

Completing the troika

$20 million is a big amount, in any country in the world. Very few of us earn this kind of wealth over entire lifetimes. So, when one hears about a guy who made $20 million EVERY WORKING DAY OF A YEAR, one is compelled to wonder - what did this guy do? What makes him special? What makes him tick?

Answering these questions is "The Greatest Trade Ever" by The Wall Street Journal's reporter Greg Zuckerman. The book traces the history, demeanor and turning points in John Paulson's life, as well as the thoughts behind the trade that led to a $4 billion payout in 2008.

The book is a definite page-turner, focusing on the human interest stories and very light on the technical aspects. This is definitely a good thing, since a lot more people will be able to enjoy the colourful stories told here - whether of Andrew Lahde, who dropped out, hustled big time to raise peanuts, and then had the best investment run of all time, only to drop out again (the letter he wrote thumbing his nose to the Establishment is a classic), or of Jeff Greene, who stole Paulson's trade and (almost) suffered big time, or of Paolo Pellegrini, the 46 year old starting from the lowest rung in Paulson's fund, working with 20 year olds.

Comparisons are odious, but since this is the 3rd (and last) book I've read on the subprime trade (others reviewed here and here), it makes sense to rank the 3. I would rate the Greatest Trade Ever up at #1 place, very very marginally ahead of The Big Short, with Roger Lowenstein bringing up a mediocre third. While a lot of the characters in the 1st 2 books are the same, its just that The Greatest Trade Ever has a lot more, covered in lesser detail. This makes it less involved, but also lighter reading (not that Michael Lewis is any slouch in that department).

Overall, a good investment of time and money!

Road trip to Shimla

We decided, almost on the spur of the moment, to drive our little one to Shimla and get some respite from the heat and humidity of Delhi. The drive, on the day of a Bharat Bandh, was very nice.

It took us, despite some unscheduled stops - to fix a burst tire, and for a blockade by some mercenary looking, slogan shouting BJP workers - about 10 hours door to door, with the road from Delhi to Ambala being very nice, Ambala to Kalka being pretty bad (but 4 laning is in progress), and again a slow 90km hill climb from Kalka to Shimla.

Shimla was a real pleasure. It was cool and very pleasant, now sunny...

and now foggy:

Now clear,

and suddenly cloudy.

But overall, just very very pretty.

Highly recommended for weekend trips out of Delhi. The drive is quite enjoyable, and the climate uphill (at least in the summer) to die for!

Thanks Megha

for introducing me to Flipkart yesterday. Highly co-incidental that these guys are in the news today!

BANGALORE: Popular belief has it that parents of young Indians with coveted degrees from the Indian Institutes of Management or Technology, quail at the thought of their children giving up a job in a multinational corporation to start a business. However, when Sachin Bansal, a Computer Science Graduate from IIT-Delhi, landed his first posting at global retail major, Amazon, his family was happy but wanted to know when he would launch his own business, so they could look for a bride for him.

“In our community a person with a salaried job is less valued than someone who runs their own business,” says Bansal who quit Amazon after a year to kick start his own e-commerce venture Flipkart.com with fellow IITian Binny Bansal. “As it happened I was married within a few months of starting out on my own,” he says.

That was more than two years ago. Today, Flipkart.com is the country's largest online bookstore, selling more than five lakh books since its inception in end 2007. “We sell a book a minute,” says Bansal who started selling movies, music and games on the portal this fortnight.

It was no cakewalk though. Flipkart could count only family and friends as customers in the initial months. “The first real order came nearly four months after the launch when we were able to source a customer request for the book ‘Leaving Microsoft to Change the World',” says Binny Bansal, who also worked at Amazon for eight months before launching Flipkart.

For one, the two Bansals had to bet on word-of-mouth marketing amongst peers, college mates, friends, blogs and social media networks such as Facebook and Twitter to find new customers as they had to keep their budget tight. “We had spent just about Rs 4 lakh to set up the business in the initial days,” says Sachin.

The partners, who moved to Bangalore with their jobs, would park themselves at the entrance to some of the city’s largest book fairs, distributing flyers to announce the launch of Flipkart. “The bookstore owners were very tolerant, they rarely objected to our presence,” he says.

Thanks to their control on budget, the company broke even in just six months, in March 2008 and the first thing they did was to rent an office and hire a helper. At the end of their first year of operations the business had grown enough for the Bansals to hire a team of six. “We had to sell at lower rates and also make sure that every customer had the order delivered at his doorstep,” says Sachin. They relied on free shipping, discounts and personalised service to build the business.

The sales picked up once Flipkart extended cash-on-delivery system to customers across 25 cities. And soon it was in the radar of venture capital firms. “The online retail business (excluding travel, classifieds, content) is worth at least $150 million and is growing very rapidly,” says Subrata Mitra, partner at private equity firm Accel India, which invested Rs 4 crore in Flipkart.com in mid 2009.

This helped the e-commerce outfit focus more on expanding its reach and increase its offerings built largely around strong regional content. Flipkart, with six million titles and the promise of free shipping across the country, claim to be the largest online bookstore in India. The site also has nearly 20,000 movie titles including English, Hindi, Bengali, Malayalam, Kannada, Tamil, Telugu, Punjabi and Bhojpuri movies and 12,000 music titles in Hindi, English, vernacular and instrumental music. The games catalogue includes games for devices like PS, PS2, PS3, Ii, Xbox and PCs.

But there are others such as Indiaplaza.in, Rediff Books and the web version of offline store Landmark, fighting in the non-travel e-commerce market that industry experts estimate at $100 million in India.

“Multi-category retail is the way to make profits in this business, I do not think an online store that sells a single category of products can build traffic, grow sales and be profitable,” says K Vaitheeswaran, co-founder of Indiaplaza.in, an online shopping mall that was set up by a team that built the country's first e-commerce company FabMart over a decade ago.

As consumer demand for new products and services creates more opportunity for young Indians to build businesses of their own, the Bansals’ decision to strike out on their own while still barely a year and a half out of college is paying them rich dividends. “By the end of March 2011 we hope to be a Rs 100 crore company,” says Sachin Bansal for whom enterprise is clearly the calling card of choice.

What's happening?...

...in the World Cup, I mean? Just up from a watching a highly disappointing Brazil - Portugal match which ended in a tame 0-0 draw. The league matches are almost up, and soon we will be talking business - no draws from the next stage, and the men will be separated from the boys.

This World Cup has been unique - both finalists from last year have been kicked out unceremoniously in the first round itself. France after making a mockery of themselves (poor coach Domenech!) and Italy after playing some really un-spectacular football. All my favourite teams have played at least one bad match each - Argentina against Nigeria (though Messi has been spectacular after that match), Brazil against Portugal, Germany had a terrible match against Serbia, England against Slovenia. The only big ticket team which has been playing well consistently so far is the Netherlands.

I have not seen any of Spain's games yet (I hope to correct that at midnight tonight), but so far, I don't think there is any one favourite for lifting the cup. If Messi continues his golden run, then it could be Argentina all the way! Though I'm now rooting for Germany (Brazil are off the top of the charts for now). Fickle me!!

Another book

For a change, I splurged almost a thousand bucks to buy Roger Lowenstein's "The End of Wall Street" when I was in the US (it was not yet available in India, so I had to buy the hardback version from there). Having read and really liked "When Genius Failed", I had high expectations from ol' Rog. However, I was a tad disappointed at the end (which also explains why it took me more than a month to finish this baby - or roughly 15x the usual time).

The book reads like a bland retelling of the furiously moving events in September 2008, when Lehman went bust and the world got into a tailspin. While it goes way back, to 2005-06, to explain the genesis of the problem, it does not offer any new insights into why whatever happened, happened. Most people who read the news (or visited Bloomberg's website) would know all this stuff.

Comparisons are odious, but if I compare this to Michael Lewis's "The Big Short", I would short Mr. Lowenstein and go long Mr. Lewis. As opposed to The Big Short's human interest and genuine freshness of content, The End of Wall Street does not offer either. Nor does the title seem very apt!

Deeply disturbing

I have been following off and on the latest story in international media - the Gulf Coast oil spill, which is releasing approx. 60,000 barrels per day of oil into the ocean. By any metric, this is the largest ever man-made environmental disaster in the history of time. The ocean is a big thing, but I dont think even it can suffer endless degradation.

People say that BP is squarely to blame. To quote a Bloomberg article: "Evidence of BP’s corner-cutting, to the point of intentional negligence and reckless endangerment, is everywhere. According to lawmakers, BP used six instead of the usual 21 centralizers before cementing the well, didn’t test the cement bond, chose a cheaper method to prevent gas from rising unchecked to the surface, and stinted on a backup blowout preventer -- all to “save time/money,” to borrow a phrase from one internal BP e-mail."

My point is not that BP is evil or that no one should make mistakes. Instead it is this - how does one equate environmental disaster on this scale (and boy, is it truly gigantic!) with money? BP says it will keep $20 billion in escrow to pay for damages. How many fish is that worth? How many people who die eating contaminated fish will that compensate for? How many loved ones would you trade for $20 billion? 100? 10? 1?

I think this is a symptom of our times - everything equals money. We are cavalier and depraved when it comes to preserving our ecology. However, I don't think this state of affairs can last very long. Something is going to give. Soon. I just hope it does not happen in my kid's lifetime. Meanwhile I do what little I can to protect the environment near me.

Waca Waca

My closest friends are usually very surprised whenever I mention that I used to play football (and not too badly, I might immodestly add) in my student days. I was a key goal-scorer for my teams, both in IIT as well as IIM. My rather rotund frame does not suggest this in the least (but hey! look at Maradona in his new avatar as coach - the guy is positively fat! Who can think that he was a terror on the field?). However, all this is a preamble to say that for the next few days, I am an obsessed guy - with the FIFA Football World Cup in South Africa.

So far, the highlight of the tournament for me has been Maicon's near impossible goal against North Korea. But I'm sure this will be surpassed easily. Predictions? I don't think Argentina are going to make it to the semi-finals. I have not seen popular favourites Spain play as yet (they open their tournament against Switzerland today), but so far my money is on perennial favourites Germany and Brazil.

And for those who have not heard it yet, here is Shakira shaking her booty in the World Cup theme song:

Tenderness and security

I am always amazed by the wife's immense patience and tenderness in dealing with our child. And I think our daughter understands this quite well too. For her, her mother is the fount of all security, love and tenderness. She is happiest when ensconsed securely within her mother's arms.

Some wise person said - God could not be everywhere, so he made mothers. I think I agree!!

Follow up on Analyst Credibility

Saw the following interesting article on Bloomberg:

Goldman Sachs Hands Clients Losses in ‘Top Trades’

May 19 (Bloomberg) -- Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse.

Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who adopted the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who used the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.

Pretty interesting, I thought. Shows how much the large investment banks follow their own analysts' advice! Clearly, they did not implement the 'top trades' otherwise how would they have made profits EVERY SINGLE DAY in the last quarter. In the same time period, clients following the recommended trades would find themselves in a much worse position. If the chef refuses to eat in his own restaurant, I would rather go hungry than eat there!

Very ordinary

Another book I'm reading right now (though with great difficulty) is called 'The Immortals of Meluha'. Frankly, I bought the book because of its cover.

The premise of the book is very very interesting - it is set in 1900BC and tells the beginning of the story of Shiva, the God of Gods. However, the execution is so pedestrian that it makes me quite sad. It reads like a Bollywood masala movie script, not the insightful, graceful and dignified attempt I had hoped it would be. I could take out Shiva, and put in Shahid Kapoor or some equally frivolous current heartthrob into the story, and nothing would change (Disclaimer: I have read only 25% of the book - like I said, with great difficulty - so it may still redeem itself. However, I doubt it)

I wish it had been a better book!

Michael Lewis does it again

I read 'The Big Short' in a couple of totally engrossed sessions over the weekend. Michael Lewis ( author of Liar's Poker, The New New Thing, Moneyball) has written another masterful, funny and insightful page turner - this time a blow-by-blow account of the great credit crisis of 2008.

The book is fantastic because its central characters are a bunch of oddball, eccentric misfits who saw what no one else could. These guys (the 'good' guys in the book) made tons and tons of money even though they had not set out to do so - all they wanted was to uncover (discover?) the truth. And all of them paid a big price for their success. The book also looks at the guys on the other side - equally smart guys who were 'long' (ie they were buying when the good guys were selling). One notable dude is a Morgan Stanley trader, who was right, but not right enough, and who ended up losing $9 BILLION in a single trade. And in the center of the mayhem, touching all the characters, good or bad, was a particular trader from Deutsche Bank.

All the guys, the guys who were right as well as the guys who were wrong, made lots of money personally from the momentous events that unfolded. In doing so, some institutions were bankrupted, a few million livelihoods lost, a generation's lifelong savings evaporated and a few fortunes made.

The book raises very important questions - for one, what are we doing today about a system where all gain is private but all loss is public? The answer, unfortunately, is that we are not doing anything. The American financial system (and by corollary, the world) is hostage to what benefits Wall Street (and in particular Goldman Sachs). And secondly, is money really worth more than a few pieces of paper? Michael Lewis, the guy who saw the big picture, and quit Wall Street to fulfil a higher calling, is absolutely the right guy to answer this question. The answer is not surprising, but its quite weird how none of us ever seem to grasp it in our own lives.

However, enough of the moralizing! The book reads like fiction, is a page-turner and is a definite must-read!

Murder: How an industry was systematically killed

The great Government of India has killed the telecom industry with such astounding brutality that it deserves special applause.

A bit of background - the telecom industry is somewhat special - to survive, it needs spectrum, which (like the Reliance D6 gas) is a national resource. A lot of players invested a lot of capital and took huge risks to start the industry from scratch in the 1990s. Just when they reached the end of the long investment cycle (10-15 years later!) and should have sat back to earn their returns, the government of India jumped in and started killing them.

First, in Jan 2008, the (dis)honourable minister for telecom suddenly changed rules midway and said that more operators would be allowed in the industry. This, despite the law saying categorically, that new licenses would NOT be given out. The incumbents, who should have got more spectrum by law, were now told - sorry! you will not get any more. We will give it away (almost for free) to friends and cronies (who by the way are going to make millions of $$s selling this spectrum to the likes of Telenor, Etisalat etc etc, without investing a single rupee of their own. Sorry, correct that - they are going to bribe me, the honourable minister, so that I can get a nice little fund going in my Swiss bank accounts.) Also, I'm going to keep an arbitrary date for consideration of applications for spectrum, so that ONLY my friends get this spectrum AND I'm going to change the rules on which incumbent gets spectrum first.

As a result, Reliance Communications, which by law was last in queue to get spectrum, will now jump to #1 position.

In any other country, this would have led to corruption charges against said minister, and he would have been in jail. But thanks to our strangely perverse country, the minister not only thrives, he actually got a second term in the government of the supposedly 'clean' Mr. Manmohan Singh despite a huge uproar on the blatant theft of revenues that should have accrued to me, the mango man of India.

The result of this was that fly-by-night operators came in, the industry got screwed because of irrational pricing, call quality suffered and investors got punished.

But the honourable minister had only begun. He now says - ha ha! you incumbents - you had the temerity to oppose my despotic theft - I will make you suffer more. So he says, retroactively AGAIN changing the rules - I am now going to arbitrarily decide that spectrum above 6.2 MHz (which I gave you 4-5 years ago for the same price that the new guys got it for) will now be priced at rates determined by the 3G auction (or more than 10-12 times what the new operators paid for their spectrum just last year). I will, perversely enough, not charge anything from the new operators. The losers, not surprisingly, are Bharti, BSNL, Vodafone and Idea. Reliance Communication, not at all surprisingly, totally not affected by this decision.

The incumbents today are large, respected companies not because they bribed thieving ministers and bureaucrats. They have built companies painstakingly, putting to risk large amounts of capital, effort and resources, and believing in the law of the land and principles of justice. To see them being systematically killed is a matter of shame. Strangely, perpetrators of this murder continue to line up their bank balances and enjoy their positions of power. But such is life in our country.

Analyst? With credibility? Ha ha...

I have nothing against research analysts. I have quite a few friends who are research analysts with respected fund houses. A few are very good and I respect their views. However, I would never ever want to become a stock analyst. A vast majority of these guys have no credibility. I would strongly advise the retail investor to strongly disregard analyst views and NEVER ever buy based on analyst recommendations. Trust me - my job gives me access to all the reports ever published, and I read quite a few of them (for a few laughs, and mostly during leisure time).

Sample this. I choose this at random - this is, in my view, a representative example of what analyst views are worth. Disclaimer: I do not have anything against these particular fund houses, just used here as examples. All of them are as good or as bad. Take a sugar company called Shree Renuka Sugars ('SRS'). The business is cyclic, and totally commoditized. Everyone knows that commodity cycles turn with great regularity. If sugar is scarce today, it will be in plenty tomorrow (and vice versa).

In a report dated Jan 18, 2010, Morgan Stanley recommended Overweight on SRS, with a target price of INR 125 (adjusted for bonus). In a short period of 3 months, the price target was reduced to INR 70 (or a downward movement of 45%). This was primarily because the stock corrected by approx 45% during this period! The world did not change in this 3 month period, and the outlook on sugar should have been known as recently as 3 months before!

Ditto Merrill Lynch. As recently as Feb 11, they said BUY with a price target of INR 173. In 2 months, the price target suddenly became INR 80 (or 50% of the one before). Talk about volatility!

Or Credit Suisse. They take the cake. They went from INR 128 to INR 58 in a similar period of time.

Credibility, anyone?? Why should anyone believe these jokers? It is not my case to trivialize the important work analysts do. However, there is something called perspective! And something called balance. And foresight. Just moving target prices around because the stock moves in that direction does not a credible analyst make! When will this change. Dot-com, Enron, Lehman - nothing has changed analyst behaviour so far. I wonder what will!

Elina

The reason for my vastly reduced blog posts these days:

Volatility? Whew!!!

Interesting times for markets globally, to say the least!

• Tiny, inconsequential Greece re-engages with history books, with a government soon about to go bankrupt, a striking and rioting public that seems spectacularly dense and insular, and overall an enactment of the theatre of the absurd. Repercussions include a 1,000 point drop in the mother of all equity market indices, the mighty Dow Jones - in about 15 minutes, and while the media goes to town with the usual cliches - never happened before, six sigma event, yada yada yada - my take is that these days six sigma events happen every six months. Poor Spain and gluttonous Portugal have to suffer for the Grecian's fun. Lesson: In the party, get drunk while you can. If you are still sober when it ends, you may be left cleaning someone else's puke!!

• The Sage of Omaha puts his 40-year reputation on the line as he defends the newest villian of the times. Move over Osama bin Laden, Goldman Sachs is here. 2 idiots who got screwed are crying foul at Goldman's mercenary ways, but I think they are more to blame than they let on. Caveat Emptor, anyone? They forgot the golden rule - Goldman Sachs will screw you when it can.

• Meanwhile, the Conservatives seem set to gain a majority in the UK (though not a government, apparently). Traders troop in to work at midnight in the financial district of London. The Tories promise to implement what I think is the solution to the whole 3 year old debt-fuelled crisis - cut the UK government deficit and apply brakes to government spending. For the sake of Britain's economic future, I hope they get their shot at fiscal prudence.

• And here in India, Reliance Industries emerges unscathed from its bruising courtroom battle with kid brother ADAG controlled companies - I think the outcome is very rational and fair and square in the national interest - natural gas found in India's territory cannot be divided between individuals. It belongs to the mango man (the aam-aadmi) and should be priced for the benefit of said mango man. So sorry, Mr Anil Ambani - you cannot make umpty zillion rupees buying my gas for cheap (disclosure - I own RIL shares)

What does one make of all this? My opinion (could be in-famous last words) - ignore all the noise. Buy the dips and hold emerging market (Indian) equities for the next 5 years. While one may or may not make a packet, one will surely be spared watching the value of painstakingly hoarded cash erode due to inflation. And keep at least 10% of the portfolio in gold. It remains the only hedge against global insanity